Question

Betty and Bob observe the following daily prices over a 5-day time span. Assume there are...

Betty and Bob observe the following daily prices over a 5-day time span. Assume there are 256 trading days in a year.

Day

Price

  0

50.0000

  1

74.5912

  2

55.2585

  3

91.1059

  4

74.5912  

a. Find the volatility per day.

b. Find the volatility per annum.

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Homework Answers

Answer #1

Return in each day = (current day price - previous day price) / previous day price

Volatility is measured by standard deviation.

a]

Volatility per day is calculated using STDEV.S function in Excel

Volatility per day is 46.20%

b]

Volatility per annum =  Volatility per day * 256

Volatility per annum = 739.14%

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